The Evolution in Digital Payments to CDBCs

What are the three key functions of money?

• A unit of account - money provides a common standard to measure the total volume of production, income, savings, and wealth
• A store of value - money allows for wealth to be stored and savings to occur
• A means of exchange - money provides a common medium for the exchange of goods and services, instead of barter

Which trends have displaced traditional banking relationships?

• Mobile network operators
• The introduction of wallets to reduce e-commerce friction
• Financial entities created by social media groups, such as Ant Financial
• The rise of peer-to-peer (P2P) payments in emerging economies

Which groups are likely to feel excluded by the digital economy?

Though the digital economy will benefit those with easy access to the internet and a mobile phone, it risks alienating other groups. Vulnerable groups may not be able to afford digital tools such as devices or access to the internet and they may use cash to help them budget. Those with cognitive or visual deficiencies due to age or various disabilities may challenge the ability to use a device safely. 

There is also the issue of network coverage, remote areas may not be equipped with terrestrial or mobile networks. The bandwidth and reliability may not be sufficient to support efficient use of online tools. Finally, some groups may not be able to provide documentation to open current bank accounts. These include under-aged people, refugees, un-documented migrants, or those whose irregular income is unattractive to commercial banks